African Journal of
Agricultural Research

  • Abbreviation: Afr. J. Agric. Res.
  • Language: English
  • ISSN: 1991-637X
  • DOI: 10.5897/AJAR
  • Start Year: 2006
  • Published Articles: 6574

Full Length Research Paper

Economic analysis of loan repayment capacity of smallholder cooperative farmers in Yewa North Local Government Area of Ogun State, Nigeria

Ifeanyi A. Ojiako1* and Blessing C. Ogbukwa2
USAID/Nigeria – Bridge to Markets II Project, Plot 401 Omofade Crescent, Omole Phase 1, Ikeja, Lagos, Nigeria.    2College of Agricultural Sciences, Olabisi Onabanjo University, Yewa Campus, Ayetoro, Nigeria.
Email: [email protected], [email protected]

  •  Accepted: 13 February 2012
  •  Published: 30 April 2012

Abstract

Farm credits played vital roles in the socio-economic transformation of the rural economies. However, their acquisition and repayment were characterized by numerous challenges including high levels of default among beneficiaries. This study analyzed the smallholder farmers’ loan repayment capacity using household data from 110 cooperative farmers from selected villages in Ogun State, Nigeria. Specifically, the socio-economic and demographic characteristics of respondents, loan repayment rate and factors influencing repayment capacity were examined. Aside from purposive selection of Yewa North, multistage random sampling technique was used to select the study sample. Data were analyzed using descriptive statistics, correlation and regression techniques. Results revealed that the average age of respondents was 45 years with 36% within 20 to 40 years active working population. Average repayment rate was 69% with 42% repaying above nine-tenths, and 20% less than one-half of potential amounts during the period. Loan size (p<0.01) and farm size (p<0.05) had significant positive influences on loan repayment capacity while household size (p<0.05) had a negative influence. From the elasticity analysis, while a 10% increase in loan and farm sizes resulted to 7 and 2.8% increases respectively, similar 10% increase in household size caused 4.2% decrease in repayment capacity. All significant variables produced a priori signs. The implication is that to enhance loan repayment capacity of smallholder cooperative farmers, policies and programmes capable of increasing sizes of loan and farm holdings, or reducing household size should be promoted. However, higher proportional increases were required for each variable to attain a desired level of increase in loan repayment capacity.

Key words: Nigeria, cooperatives, farm size, household size, loan size, repayment capacity, repayment rate, smallholder farmers.